Credit: Alton Towers

Merlin loses its magic after rollercoaster crash

The crash at Alton Towers this summer continues to stunt profits at the resort operator, but Legoland is building growth.

by Adam Gale
Last Updated: 21 Oct 2015

Merlin Entertainments is feeling decidedly less magical since the Smiler rollercoaster crashed at its Alton Towers theme park in early June, costing two young people their legs. It now expects profits for 2015 to be at the lower end of its previously stated £40-50m guidance – around half the £87m it made in 2014.

For the 36 weeks to September 5, Merlin’s theme park division suffered an 11.4% decrease in like-for-like revenues as adrenaline seekers got cold feet and decided to do something safer like Parkour or blindfold tightrope walking instead. However, the sales impact on the period since the accident on June 2 is likely to be significantly greater than 11%.

Revenues had declined only 2% for the six months for the end of June, a period that included only a few weeks after the disaster. It's true that the summer is the critical trading period for theme parks (July and August produce about a third of the group's revenues) but trading must have been pretty dire to bring sales down a further 9% for the whole nine month period.

While Alton Towers and to a lesser extent Merlin’s other theme parks have been suffering from reduced footfall, however, this division only accounts for roughly a quarter of the group’s sales, and even then includes parks outside of the UK (and thus sheltered from its negative publicity storm).

The rest of the business has been ticking over nicely. Midway attractions, which is Merlin’s largest division and includes Madame Tussauds and the London Eye, has had like-for-like growth of 2.6% so far in 2015, while the firm’s Legoland parks continue to be the main driver of overall growth, expanding 6.7%.

Despite the dampening influence of the weak euro, the group’s total growth including new attractions was 2.2% - not exactly spellbinding, but hardly a catastrophe either. Thank goodness for the portfolio effect, eh.

While the Smiler accident has definitely hit Merlin where it hurts (the bottom line), it doesn’t seem to have caused any permanent reputational damage. Boss Nick Varney’s skilful handling of the aftermath saw to that.

Despite the fact that he believes it will continue to affect Merlin's profitability next year, Varney sees ‘good overall progress on its growth strategy’, with at least eight new attractions worldwide due to open next year and more under construction. Shares dipped modestly (1.2%) to 378.3p by mid morning.

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